Money is pouring into the crypto market; as of April 27, 156 startups focused on digital technology had raised $3.1 billion, compared to just $2.3 billion raised in 341 deals in the entire 2020.
Coin Metrics has raised $15 million in a Series B investment round led by Goldman Sachs.
“We think this is a huge day for us,” Tim Rice, a co-founder and the firm’s chief executive officer said. “A huge credentialization.”
While Castle Island Ventures, Highland Capital Partners, Fidelity Investments, Avon Ventures, Communitas Capital, and Collab+Currency increased their investment in the company, new investors to join included Acrew Ventures, Morningside Group, BlockFi, and Warburg Serres Investments.
Founded in 2017, Coin Metrics is a cryptocurrency and blockchain data provider to institutional clients which plans to use the proceeds to grow in Europe and Asia, create new products and expand its current offerings.
Mathew McDermott, global head of digital assets for Goldman Sachs’s global markets division, will join Coin Metrics’ board of directors, Rice said in an interview.
According to Rice, the way large institutions such as asset managers and Wall Street banks are approaching crypto is different from the 2017 bull market as “This time around you have people looking for a holistic data solution,” he said. “They need to have solid data to get into the asset class.”
Fidelity Investments, one of Coin Metrics’ investors, is also its client. “We’ve definitely seen the institutions behave very seriously; they’re now signing contracts with us,” Rice said.
Banks that have been staying on the sidelines are also getting comfortable with the $2.47 trillion market.
“Customer demand is starting to pull them in,” Rice said.
Earlier this week, we reported that the largest cryptocurrency exchange in the US, Coinbase, also acquired data analytics platform Skew for an undisclosed amount to better serve its institutional and trading clients.
Money has been pouring into the crypto market amidst the ongoing bull run. Not just crypto assets but projects like Digital Asset Holdings LLC, Chainalysis Inc, Blockchain.com, Paxos Trust Co. are raising a lot of funds.
As of April 27, 156 startups focused on digital technology had raised $3.1 billion, compared to just $2.3 billion raised in 341 deals for all of 2020, according to CB Insights.
AnTy has been involved in the crypto space full-time for over two years now. Before her blockchain beginnings, she worked with the NGO, Doctor Without Borders as a fundraiser and since then exploring, reading, and creating for different industry segments.
On CME, Ether futures volume and OI is up 50-60%, while for Bitcoin, it is declining. Still, several metrics show that people are not preparing to sell their BTC and have “longer-term conviction” in the trillion-dollar crypto asset.
Institutional investors seem to be more interested in Ether right now than Bitcoin.
Ether futures had a record volume day this week, trading $228 million in volume, as per Skew. It is a relatively new product as CME Group launched Ether future just a few months back on Feb. 8.
Despite these good numbers, Ether futures are only catching up to the underlying spot volume.
According to the March report of CryptoCompare, in terms of total USD trading volume, CME’s newly launched ETH futures reached $1.5 billion in March, up 51.3% since February. Meanwhile, BTC futures volume on CME has decreased by 0.5% to $59.4 billion.
About ten days ago, at the announcement to the upcoming CME micro Bitcoin futures, Tim McCourt shared that since the Ether futures launch, they have seen 767 contracts, equivalent to 38,400 Ether, trading on average each day compared to 13,800 contracts equivalent to about 69,000 BTC in 2021.
Much like volume, open interest is also on the surge, with ETH OI averaging $102 million, up 66.2%, in March on CME, and currently, at $187 million. As for Bitcoin, traders err on the side of caution, with OI dropping by 15% to $2.1 billion last month.
Average open interest for March was down 14.1% from Feb. across all futures derivatives products at $25.9bn. Binance, however, recorded a 1.5% increase and the highest open interest on average at $7.5bn.
The OI shifted lower as the price of Bitcoin remains stuck under $60k while Ether’s is trading above $2k, hitting a new ATH at $2,050 last weekend.
Despite the lack of movement in price, bitcoin fundamentals paint a healthy and bullish picture, as noted by Yassine Elmandjra, an analyst at ARK investment and on-chain analyst David Puell in “Buyer and Seller Behavior: Analyzing Bitcoin’s Fundamentals.”
One of the metrics, Thermo Capitalization, which is the total USD value of coins paid to miners, is at $23 billion, nearly 98% below bitcoin’s market cap, indicating that “miners no longer dominate as natural sellers.”
Another metrics is “HODL” waves shows that today, roughly 55% of bitcoin’s supply hasn’t moved in more than a year, illustrating investors’ longer-term conviction in the crypto asset.
“Whenever market cap drops below realized cap, the overall bitcoin market sells at a loss, denoting capitulation,” noted Elmandjra and Puell.
Another bullish metric is coindays destroyed, an increase of which implies that holders are moving coins out of long-term storage and taking profits.
The metrics measure the time-weighted turnover of bitcoin and is currently slightly above 5 billion, still 30% below its all-time high in early 2018 in spite of the price tripling its 2017 ATH, depicting “a healthy bull market.”
AnTy has been involved in the crypto space full-time for over two years now. Before her blockchain beginnings, she worked with the NGO, Doctor Without Borders as a fundraiser and since then exploring, reading, and creating for different industry segments.
Leading crypto metrics site, CoinMarketCap, has launched an initiative that will enable its account holders to earn tokens for learning about projects in the industry. Dubbed ‘CoinMarketCap Earn,’ this program intends to scale educational activity in the crypto space as opposed to providing investment or financial advice. Notably, a similar initiative was launched by Coinbase back in 2019, although it runs as an education rewards program.
The CoinMarketCap Earn program is an interesting prospect, given the platform’s cutting edge in crypto traffic. A good percentage of stakeholders in the industry, including newcomers, visit the site regularly for price updates alongside other market stats. With such an established audience, its Earn program could onboard millions into the crypto ecosystem.
According to the FAQs on CoinMarketCap Earn, the program will enable interested users to watch educational videos of featured crypto or blockchain projects, after which they will take quizzes. Should one be successful in answering all the quiz questions, they can earn up to $10 worth of the project’s underlying tokens.
A source from CoinMarketCap has since told The Block that the program will be featuring two projects every month with an 8-day campaign period for the token offers. While the news comes as a boost to the crypto community, markets including Mainland China and the U.S, have been excluded from the product. This is where Coinbase, which serves the American market, still beats CoinMarketCap despite a recent acquisition by Binance.
Band Protocol Debuts First
Following the progress made towards crypto education, Band protocol, which is a cross-chain focused on data oracles for the smart contract and DeFi space, will be first to launch an earning program. The Sequoia Capital-backed project has already allocated $160,000 worth of its native tokens ‘BAND’ to this course. Band Protocol CEO, Solaris Srinawakoon, emphasized on the value addition in scaling crypto education,
“Education is key to accelerating the use of crypto assets, and we are thrilled to be part of CoinMarketCap’s efforts to help users learn more about their underlying technology.”
Coin Metrics, a crypto analyst firm, has released a new framework called ‘Trusted Volume Framework’ to evaluate how trustworthy is the trading volume clams made by various exchanges every year.
The analysts at Coin Metrics found that only a handful of exchanges, among hundreds, managed to cut when it comes to offering trading volume data. The study also found that a majority of the exchanges have been showing 10x the actual volume. Exchanges dwell into wash trading, and many other unethical means to show an inflated number to attract more customers.
Key Takeaways of the study revealed:
Fake trading volumes have been a black mark on the industry – it is difficult to find a single metric to easily sift through the reported numbers.
We’ve taken a data-driven approach to the problem and are excited to introduce a “trusted volume” metric to help identify the legitimate trading volume.
Our framework for measuring the reporting quality of exchange is broken down into three broad categories: volume correlation, web traffic analytics, and qualitative features.
As of June 2020, the passing exchanges for ‘trusted’ spot volume include Binance (and Binance US), Bitbank, Bitfinex, bitFlyer, Bitstamp, Bittrex, CEX.IO, Coinbase, Gate.io, Gemini, itBit, Kraken, and Poloniex.
Jon Geenty, a data scientist at Coin Metrics, commented on the growing trend of showing inflated numbers and said:
“Exchanges are especially notorious for boosting volume numbers to game ranking sites or other nefarious reasons. The industry is full of technical information that can be difficult to understand and, at times, misleading. We are working to create a more transparent environment for those within it and a safer, more trustworthy source for those hoping to learn more.”
How did Coin Metrics Evaluate Fake Volume?
Analysts at Coin metrics did not collect data from top exchanges; instead, they collected trading volume data from trusted spot exchanges which included:
The Coin Metrics subjected these exchanges to three litmus tests, which included comparing the price feed for the exchange against the trusted exchanges. Any exchange with a 60% correlation with the trusted exchange ‘passed’ the test.
The second test assesses the exchange’s volume against the web traffic of the platform, so if an exchange is inflating its volume, then the ratio will be higher as well.
And for the third test, Coin Metrics checks qualitative measures taken by the exchange, like whether the exchange is un/regulated, whether the platform boasts KYC features and others.
Among the most popular exchanges which could not pass the test had only one contender in OKEx, which failed on all the tests.
It was revealed that, in the last 24 hours, the overall volume of the crypto market was $13.25 billion, while the exchanges combined showed a total trading volume of $113 billion.
According to fresh data released by Coin Metrics, the all-time revenue generated by Bitcoin Miners has topped $14 billion.
Yahoo Finance had reported on 30th August that despite the network increasing its hash rate by a large percentage, miners are still in a position to make tons of money. For those not in the know, increasing the hash rate in a network reduces the profit made by miners.
BTC Miner Revenue Continue To Grow At An Exponential Rate
The report from Yahoo notes that after the inception of the BTC network, it took the miners a total of 8 years to surpass the $5 billion mark. It, however, notes that the next $5 billion was mined at a faster rate as it only took 8 months for the miners to break their all-time revenue and top $10 billion.
What these mining statistics mean is that if the current mining profitability is to remain on track, then chances are that miners will top the $20 billion revenue mark by the start of next year (2020). The current mark of $14 billion is the most impressive taken into account that the hash rate has recently been on a massive tear. It is a tear that has seen it break some past records in the last few months.
Kik might have presented wrong information about its Kin network
Coin Metrics compared the data provided by Kik with other blockchain networks such as ETH and BTC
Kik has recently provided information about activity on its blockchain network to the U.S. Securities and Exchange Commission (SEC). However, Coin Metrics reported that these claims made by Kik are inaccurate.
Kik’s Inaccurate Claims About Kin
Back in 2018, Kik claimed that their network exceeded Ether (ETH) and Bitcoin (BTC) in daily blockchain activity. This demonstrated that Kin was adopted and used by many individuals around the world. However, Coi Metrics claims that the daily operations included a large number of account creations.
Indeed, some of these accounts seem to be empty after a single transaction processed. Although Kin had a very interesting number of daily transactions, it was far from reaching a similar level as top tier blockchain networks.
In addition to it, Kik has also questioned the SEC regarding the token as a security. They said that there were over 300,000 individuals that earned and spent kin as a currency. Coin Metrics explained that there have been just 35,000 addresses that held more than 10,000 kin worth around $0.23.
On the matter, the report commented:
“This is orders of magnitude less than other blockchains in our sample, which each have at least 1,000,000 addresses that hold at least $1.”
Coin Metrics explained that multiple metrics showed that the Kin digital asset was not used more than other chains such as Bitcoin or Ethereum. Just last month, Kik has launched a $5 million crypto campaign in order to deal with the SEC and improve its regulatory clarity.
Back in September 2017, Kik was able to gather almost $100 million during a token distribution event. However, the US regulator claimed that Kik may have violated securities laws in the country. Since that moment, Kik is working in order to prove it has been operating in the market as it should.
Coin Metrics will be adding sentiment data into its platform
This is expected to help investors make more informed decisions
The cryptocurrency data company Coin Metrics will be incorporating Social Market Analytics’ (SMA) crypto data feed into the market data platform they have.
This would allow users to know more about the virtual currency market and the sentiment in the space. The information was released a few hours ago by The Block.
Coin Metrics Adds Data From Twitter
The cryptocurrency community is very large on Twitter and it is usually a good indicator about the general sentiment of the market. Now, this data could become more valuable thanks to a new data partnership.
By incorporating SMA into its market data platform, it will be possible for users to have sentiment data on different cryptocurrencies.
The CEO of Coin Metrics, Tim Rice, said that the sentiment data makes social media discourse digestible in a quantitative way. This would allow traders, investors and enthusiasts are able to plan their future strategies with more information available. About it, Rice commented:
“We believe that the power of combining sentiment data with granular network and market data is fundamental to building a deeper understanding of crypto assets.”
At the same time, Rice explained that the feed has been built so as to provide order to a very chaotic Twitter feed. With this system, it would be possible to exclude spam tweets and bots. With this service, it is possible to calculate 19 different aggregate sentiment metrics to snapshots of one minute.
Traders are also very interested in platforms that provide different metrics and allow them to perform a complete analysis of the market. Sentiment information from Twitter is also a very important thing for them to analyze and make decisions.
Rice explained that institutions are also looking to make decisions with the available data by accessing sources of data they understand from their legacy investing frameworks. The team behind Coin Metrics believes in the power of combining sentiment data with granular network and market data in order to provide a clear understanding of the crypto space.
Earlier in June, Coin Metrics acquired Bletchley Indexes in order to provide better services to users.
According toOnChainFX(one of the top digital asset metrics and ranking platforms which is used to track real transaction volumes of any crypto asset), data gathered by LongHash shows that most tokens have dropped about 50% since reaching their all time highs (ATH).
The Ethereum based ETHLend was the most surprising of them all. ETHlend uses the digital token as a form of collateral during transactions.
LongHash described ETHLend as a decentralized peer-to-peer smart contracts lending platform.
The Ether (ETH) based token became quite popular as investors used Ether (ETH) for smart contracts transactions which led to massive gains before the bear market hit.
Similarly, tokens like Ravencoin and Holo have remained at half their all time high values since the bull run of 2017.
The Binance Coin (BNB) And Chainlink (LINK) Growth
However the resurgence of the Binance coin (BNB) and Chainlink (LINK) came as a surprise to the crypto community as they both witnessed all time highs way higher than their previous ATHs.
Short Lived Bull Rush
According the the chart byLongHash, tokens witnessed their all time highs between December 2017 and January 2018, then dropped significantly. Many crypto investors as well as traders missed out on this bull rush as it was short lived and the “crypto winter” phase emerged.
On the 13th of June 2019, LongHash, sharing the significant growth of LINK, in aTweet, said :
“Chainlink (LINK) is having a pretty good day”.
The Binance coin (BNB) and Chainlink (LINK) have done pretty well in recent times, which of course is in the pleasure of the crypto community.
[Author Alert] The author’s opinions above are solely based on their own self-conducted research. Assume any and all authors are using, holding, trading and/or buying cryptoassets mentioned as a portion of his or her financial portfolio. Use information at your own risk, do you own research, never invest more than you are willing to lose.
The purpose of this article is to take a look at Bitcoin’s topology and metrics and relay that information.
In this piece, various facets of the Bitcoin network will be analyzed to assess its overall ‘health’ and status.
Any and all metrics that can be conveniently viewed via various explorers/data analysis sites will be aggregated and cited appropriately in the compilation of this report. Information compiled May 20th, 2019
Understanding the Picture Above
Upon viewing the picture above, you may have noticed that there are two scales on the y-axis. On the left side, we can see percentages and on the right, we can see data sizes.
The reason why ‘Bitcoinvisuals’ is a preferred source for analyzing a hefty number of Bitcoin metrics is because they run their own node using default settings. So when their findings are analyzed, we can get a better sense for the ‘load’ that certain Bitcoin conditions impose upon individuals running full node setups on the network.
Specifically, ‘Bitcoinvisuals’ states:
“Our node’s memory usage for unserialized mempool data. We run default Bitcoin Core settings.”
Notably, ‘BitcoinVisuals’ is running a ‘bitcoind’ setup, which is optimized for RPC (remote procedure call) usage.
What is ‘Bitcoind’?
When ‘BitcoinVisuals’ refers to ‘bitcoind’, they are referring to a version of the node software that allows for querying the chain using JSON.
Bitcoin, in its initial iteration, could not be queried for information (i.e., wallet balances, addresses, transactions, etc.) without implementations such as ‘bitcoind’ being created to facilitate such calls.
Examples of API Calls That Can Be Made
The list above is not exhaustive, by any means — but it does shed greater light on how several of the most popular blockchain explorers are able to extract information and deliver it to users in a ‘readable’ format.
Explain the Y-Axis Percentages
The percentages on the left side of the y-axis, represent the nodes set capacity for pulling transactions from the mempool.
Setting a limit on the number of transactions that are pulled from the mempool is critical to ensure the security of the protocol. Otherwise, without a limit, nodes would endlessly pull in transactions into their mempool.
This, of course, would create a significant vulnerability on the network because spam attacks would eventually force nodes (with insufficient memory) to crash.
Fortunately, as stated above, there are measures in place on the protocol that are designed to prevent this from happening. The specific code in question can be found below:
In the picture above, we can see that the default max MB that nodes will pull running this implementation is 300 MB.
Accordingly, the percentages on the left side of the y-axis for ‘BitcoinVisuals’ shows how ‘full’ the node’s mempool allowance is at a given time.
Why This is Important
It is ultimately up to nodes to relay information to the network and it is up to nodes to accept certain information as well. While 300 MB is the default capacity for nodes, there is no guarantee that nodes will be able to continuously function at this capacity in the long-term without running into some issues.
In such an instance where the mempool is filled (under the default settings), full nodes running bitcoind can exercise their option to elevate the ‘minrelaytxfee’ which simply stipulates that:
“Fees (in BTC/kB) smaller than this are considered zero fee for relaying, mining and transaction creation (default: 0.00001).”
If this is confusing, take a look at the stackexchange answer a user gave below, which eloquently explains the ‘minrelaytxfee’ setting in greater detail:
If, for whatever reason, a full node does have its mempool filled, then new transactions will replace older transactions as long as the newer ones have a higher TX than that of the pre-existing transactions with the lowestfee.
Recent Spike in Transactions
For those that have been paying attention to current events in the Bitcoin space as of late, they may have noticed that Bitcoin’s mempool has seen a noticeable spike.
However, this spike has not coincided with the increase in price (i.e., greater usage from increased interest), but rather as a result of a ‘spam attack’ on the network.
It Appears This Recent Spike May Be Related to the Bitcoin Cash Spike in Transactions
Recently, the Bitcoin Cash network was attacked during its hard fork upgrade. This was covered in full by the author in a series of tweets posted below:
1/ A quick look at the topology for the Bitcoin Cash $BCH network. >50% nodes upgraded currently.
No ‘issues’ reported in the Git, so doesn’t seem like there’s a software issue. Just seems like some nodes haven’t upgraded to the new software yet. pic.twitter.com/IaR2nQcEOM
In what may have been retaliation, it appears the Bitcoin mempool also started getting spammed that same day (May 15th, 2019):
At one point, there was approximately 150 MB worth of transactions in the mempool at one time.
Since then, however, it appears that the mempool has sorted itself out — dropping from a high of 70k+ unconfirmed transactions to just 500 at its lowest.
How Do Spam Attacks Work?
In order to understand this, we need to go back to why Bitcoin Core has a ‘fee market’ set in place.
There is some insight provided for this in Bitcoin’s whitepaper. Specifically under the ‘Incentive’ heading, it states:
This is elaborated upon further in the Bitcointalk forums when a user questions how Bitcoin intends to prevent itself from being rendered vulnerable to a DoS attack on the protocol: https://bitcointalk.org/index.php?topic=287.msg8810#msg8810
In this thread, Satoshi Nakamoto explains that the fee structure was not only established in Bitcoin to provide an incentive for miners to mine, but also to protect the protocol from spam costs.
The logic behind Satoshi’s reasoning was simple. If a mandatory minimum is attached to TXs of a certain size, then this would disincentivize bad actors from spamming the transaction with constant 1 satoshi sends.
This theory worked well for the time being (circa 2010), but in latter days, we have come to see that Bitcoin has continued to be plagued by spam attacks due to bad actors seeking to harm the protocol’s efficacy.
This results in an elevation of the mean fee that must be paid in order to get a transaction into a block because Bitcoin transactions are accepted on a priority basis (remember the economic incentive we discussed above).
Due to the basic nature of humans, Satoshi was able to accurately use this to Bitcoin’s advantage by allowing miners to choose transactions with the highest fees. Thus, those seeking to get their transactions confirmed “immediately” must simply pay a fee that is higher than the bulk of users.
This break down by user, ‘AndrewBuck’ in the thread, explains the system perfectly:
As more transactions are spammed onto the network, the fee rate increases. This is also true with usage of Bitcoin.
Notably, this led to a situation in 2017 where, when the mempool was at its largest size (consistently, day over day), the necessary median fee to ensure that a transaction was confirmed in a reasonable amount of time was approximately $28.
In some cases, the fees for sending Bitcoin in a convenient time frame (within 1 or so transactions) was even greater than the amount that some individuals were looking to transact or the fee would take a greater portion of the ‘send’ than the remainder of the transaction after the fee had been extracted.
Thus, since we have already seen what many claim to be increased activity on the blockchain, we’re going to go ahead and take a look at Bitcoin’s median and mean fees over times.
Bitcoin Median Fee
As expected, the median transaction fee (fee/tx) increased substantially during the time that the market had been spammed.
As can be seen in the chart above, on May 12th, 2019, the average fee/tx was $0.39 (USD value derived from averaged market price of Bitcoin at the time). Soon after, however, the average fee/tx rose to $4.79:
The good news is that the average fee/tx here is lower than what it was previously when mempools were filled up to a comparable height before SegWit implementation became more widespread (2017).
However, it is still worth noting that the average transaction fee did spike to $4.79. Those in the upper 90th percentile were paying as much as $6.37 to have their transactions confirmed.
Even now, at the time of writing, the transaction average fee/tx stands at $2.56:
Comparing the Fees to Other Protocols
Bitcoin Cash Fee
At the time of writing (May 20th/21st, 2019), the median Bitcoin Cash fee/tx (USD) was $0.0011.
At the time of writing, Litecoin’s median fee/tx is $0.015 (USD). In order to put these metrics into perspective, however, mining profitability must be taken into account:
The fact that Bitcoin is a more expensive protocol (in terms of sending fees) is not an issue. However, when this issue is juxtaposed with the fact that Bitcoin Cash is slightly more profitable to mine on currently, these statistics become a bit worrisome for any Bitcoin maximalist.
While Bitcoin does still possess the advantage of the network effect, large disparities between Bitcoin Cash’s financial metrics and Bitcoin could pose a problem in the short-term.
Evaluating Bitcoin’s Fees / (Conclusion)
As mentioned above, one of Bitcoin’s primary issues in 2017 was the exorbitant fees that users had to pay in order to have their transactions confirmed in a reasonable time frame.
As noted earlier in this report, transaction fees had climbed to well over $20 at one point in time.
Part of this was due to the activity on the network, but this was also partially attributable to ‘mempool spamming’, which is yet another phenomenon that was covered earlier in this report.
Specifically, however, in the next installment of this research, we’re going to go ahead and look at the current fee rate (in Satoshis and USD) and analyze whether Segregated Witness has been helpful in lowering the overall fee rate for Bitcoin.